Yellowknife's dream of tapping into geothermal heat from an abandoned gold mine is in doubt, after residents voted not to let the city borrow money to advance the project.

Residents voted 1,362 to 997 on Monday against allowing the City of Yellowknife to borrow up to $49 million for the Con Mine project, a proposed district energy system that would distribute heat from the old underground mine to various downtown buildings.

Mayor Gordon Van Tighem said he was disappointed with the No votes in Monday's referendum, but he respects the wishes of residents.

"When you go out to the residents of the community and they come back and tell you something, then that's what you need to listen to," Van Tighem told CBC News.

City officials have said they needed a loan to finance its investment in the Con Mine geothermal project, as the federal government has offered Yellowknife a $14-million Clean Energy Fund grant as long as the city can prove its own commitment.

The city had also hoped to use borrowed money as leverage as it seeks a private partner for the geothermal system.

But without public permission to borrow any money, city council will have to go back to the drawing board without the federal grant.

"There was discussion from private companies that were interested in investing in it, so we'll chat with them and see what their interest is, then talk to the federal government and if there's a Plan B," Van Tighem said.

Economic viability questioned

Con Mine produced five million ounces of gold from 1938 to 2003. Reports have found the mine's high temperatures, which exceed 30 C, and its location directly below the city would make it a prime source of geothermal energy.

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The City of Yellowknife was hoping to borrow up to $49 million so it can set up a district heating system from the defunct Con Mine, where temperatures underground exceed 30 C. ((CBC))

All but one of Yellowknife's city councillors were hoping for a Yes vote on Monday. Only Coun. David Wind opposed it, raising questions about whether taxpayers would be left on the hook for a big energy project that might not be economically viable.

As it turned out, the majority of referendum voters seemed to have sided with Wind.

"I do support the concept of geothermal heating of the city," said resident George Lessard. "I just think this was a very very poor way of trying to get it done."

Another resident, Jennifer Pagonis, said she is not convinced that taxpayers would not have to pay for at least part of the project, which she said would only benefit downtown businesses and city councillors.

"They're trying to make this a legacy for them that, you know, we are green, we're trying to make [the city] better, trying to make it more green and better for our environment. But, I mean, you can't do that at the cost of the people," Pagonis said.

"This could be a great idea maybe, but if the pieces of the puzzle aren't put in place, how do you sell it?"

Public misinformed, some say

Pagonis said even if the city looks at other funding options, it will take a lot of effort to convince her to support the Con Mine geothermal project down the road.

But Coun. Lydia Bardak said she wonders if the No votes were due to a lack of trust in city council, or a wealth of misinformation about the project's impacts on taxpayers.

"Some of the decision-making was based on misinformation," she said. "This is a no-brainer — this is a win situation for Yellowknife. And so we got to find another way to tackle it."

Shauna Morgan of the "Yes We Con" campaign, which urged residents to vote in favour of the loan, agreed that many voters were misinformed.

"There was a lot of misinformation out there going back and forth that persisted, despite our efforts and despite best efforts by the city," Morgan said.

"They did a great job of public consultation, meetings, trying to spread proper facts. But in spite of that, these sort of wrong facts kept coming up over and over again."

Van Tighem said he is not sure if most Yellowknifers are simply against the idea of harnessing geothermal heat from the Con Mine, or if they were opposed more to the city borrowing money for it.

"It would have been nice to have a second question of, 'Do you agree with the project or not?' Then things would have been clearer," he said.

"Now it's a matter of seeing if there's a way if it can still go forward or see if it's not going to happen."